Advising on socially-responsible investment is an area of expertise that Charcol Holden Meehan has prided itself on for many years. It was about 16 years ago that the firm started to research SRI. Interestingly, this was as a result of clients asking if their money could be invested ethically. They had received unit statements detailing their investments and, when clients looked at the list of the shares, they were horrified to find that they were supporting companies whose activities they did not approve of. Was there not an alternative?
Holden Meehan, as we were then, began to research this area and has since regularly produced a guide to ethical investment and now a guide to socially-responsible investment.
It is fair to say that, in the early days, some of the stances taken by ethical funds and, indeed, ethical advisers were quite dark green. Many were wedded to a purest approach and some were prepared to sacrifice performance to achieve this. We did not take this view but adopted a midto light-green approach.We appreciate that clients do want to make money while investing responsibly.
It is interesting to see how the dark-green nature of ethical investment developed over time to adopt a lighter-green approach. You can see this in the funds that have evolved. In general, the older ones tend to be more restrictive in nature and the more recent ones tend to be broader based. Indeed, we have now moved beyond the light-green approach to engagement. This is where investment funds discuss business practices and how they can be improved with the companies they invest in.
Many critics say this has watered down the proposition of socially-responsible investments. We see it as broadening the ethical proposition to reach a wider audience.
In conjunction with National Green Week (June 1 to 4) we have conducted a study which shows that people are still divorcing their ethical stance and investments. While a third intend to boycott certain companies and products, only 5 per cent will implement a change in their investment portfolio. Clearly, investors are not making the link between the practices they choose to adopt in their home, such as recycling and using the car less, with what investments they place their money in.
Encouragingly, younger people between 18 and 29 are more aware of the need to be green. This is evidenced in that 76 per cent of those interviewed in that age range are pro green compared with 59 per cent of those aged 50-plus. It is also encouraging to see that 15 per cent of young consumers said they would move their money to an account with a bank that has ethical principles.
Women tend to be greener than the men. Sorry, chaps. Around 68 per cent of women said they would like to embark on a greener lifestyle against 59 per cent of men. However, there is again an inconsistency in translation to the investment market as 57 per cent of men will insure that their investments are screened compared with just 36 per cent of women. Well done, chaps.
So, there is a fundamental message to get across that investors can make a big difference by investing ethically. However, it is fair to say that some consumers do feel that they are not able to have their cake and eat it.
Do ethical investments perform? There are sufficient statistics to show that investors do not have to damage their wealth by investing ethically. As with any other type of investment, it very much depends on having a good fund manager with good research.
These are the over-riding key points, much more so than how restrictive the fund is. Indeed, there is a good argument that further research, such as that conducted by many of the SRI funds, can uncover more data about a firm that will also better assess its financial viability.
So, the future for ethical investment is good. There are few advisers now who would not consider they have even a degree of expertise in this area. This is a big change from even five years ago.
It is very encouraging to see this as it is important to offer choice. Of course, it is up to clients what they decide to do but, in order for an adviser to give broad advice, they need to be able to cover all aspects of what is suitable for an individual client.
Amanda Davidson is a partner at Charcol Holden Meehan